81 FR 54905 - Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Between Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., BOX Options Exchange LLC, Chicago Board Options Exchange, Incorporated, C2 Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange, LLC, The NASDAQ Stock Market LLC, NASDAQ BX, Inc., NASDAQ PHLX, Inc., National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc.
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 159 (August 17, 2016)
Federal Register Volume 81, Issue 159 (August 17, 2016)
| Page Range | 54905-54911 | |
| FR Document | 2016-19582 |
[Federal Register Volume 81, Number 159 (Wednesday, August 17, 2016)] [Notices] [Pages 54905-54911] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-19582] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78552; File No. 4-618] Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Between Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., BOX Options Exchange LLC, Chicago Board Options Exchange, Incorporated, C2 Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange, LLC, The NASDAQ Stock Market LLC, NASDAQ BX, Inc., NASDAQ PHLX, Inc., National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. August 11, 2016. Notice is hereby given that the Securities and Exchange Commission (``Commission'') has issued an Order, pursuant to Section 17(d) of the Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring effective an amendment to the plan for allocating regulatory responsibility (``Plan'') filed on August 4, 2016, pursuant to Rule 17d-2 of the Act,\2\ by Bats BZX Exchange, Inc. (``BATS''), Bats BYX Exchange, Inc. (``BATS Y''), BOX Options Exchange LLC (``BOX''), Chicago Board Options Exchange, Incorporated (``CBOE''), C2 Options Exchange, Incorporated (``C2''), Chicago Stock Exchange, Inc. (``CHX''), Bats EDGA Exchange, Inc. (``EDGA''), Bats EDGX Exchange, Inc. (``EDGX''), Financial Industry Regulatory Authority, Inc. (``FINRA''), International Securities Exchange, LLC (``ISE''), Investors Exchange LLC (``IEX''), ISE Gemini, LLC (``ISE Gemini''), ISE Mercury, LLC (``ISE Mercury''), Miami [[Page 54906]] International Securities Exchange, LLC (``MIAX''), The NASDAQ Stock Market LLC (``NASDAQ''), NASDAQ BX, Inc. (``BX''), NASDAQ PHLX, Inc. (``Phlx''), National Stock Exchange, Inc. (``NSX''), New York Stock Exchange LLC (``NYSE''), NYSE MKT LLC (``NYSE MKT''), and NYSE Arca, Inc. (``NYSE Arca'') (each, a ``Participating Organization,'' and, together, the ``Participating Organizations'' or the ``Parties''). As further discussed in Section III, below, this Agreement amends and restates the agreement by and among the Participating Organizations approved by the SEC on October 29, 2015.\3\ --------------------------------------------------------------------------- \1\ 15 U.S.C. 78q(d). \2\ 17 CFR 240.17d-2. \3\ See Securities Exchange Act Release No. 76311, 80 FR 68377 (November 4, 2015). --------------------------------------------------------------------------- I. Introduction Section 19(g)(1) of the Act,\4\ among other things, requires every self-regulatory organization (``SRO'') registered as either a national securities exchange or national securities association to examine for, and enforce compliance by, its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO's own rules, unless the SRO is relieved of this responsibility pursuant to Section 17(d) or Section 19(g)(2) of the Act.\5\ Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of broker-dealers that maintain memberships in more than one SRO (``common members''). Such regulatory duplication would add unnecessary expenses for common members and their SROs. --------------------------------------------------------------------------- \4\ 15 U.S.C. 78s(g)(1). \5\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively. --------------------------------------------------------------------------- Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.\7\ With respect to a common member, Section 17(d)(1) authorizes the Commission, by rule or order, to relieve an SRO of the responsibility to receive regulatory reports, to examine for and enforce compliance with applicable statutes, rules, and regulations, or to perform other specified regulatory functions. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78q(d)(1). \7\ See Securities Act Amendments of 1975, Report of the Senate Committee on Banking, Housing, and Urban Affairs to Accompany S. 249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975). --------------------------------------------------------------------------- To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the Commission to name a single SRO as the designated examining authority (``DEA'') to examine common members for compliance with the financial responsibility requirements imposed by the Act, or by Commission or SRO rules.\9\ When an SRO has been named as a common member's DEA, all other SROs to which the common member belongs are relieved of the responsibility to examine the firm for compliance with the applicable financial responsibility rules. On its face, Rule 17d-1 deals only with an SRO's obligations to enforce member compliance with financial responsibility requirements. Rule 17d-1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including sales practices and trading activities and practices. --------------------------------------------------------------------------- \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively. \9\ See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976). --------------------------------------------------------------------------- To address regulatory duplication in these and other areas, the Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits SROs to propose joint plans for the allocation of regulatory responsibilities with respect to their common members. Under paragraph (c) of Rule 17d-2, the Commission may declare such a plan effective if, after providing for appropriate notice and comment, it determines that the plan is necessary or appropriate in the public interest and for the protection of investors; to foster cooperation and coordination among the SROs; to remove impediments to, and foster the development of, a national market system and a national clearance and settlement system; and is in conformity with the factors set forth in Section 17(d) of the Act. Commission approval of a plan filed pursuant to Rule 17d-2 relieves an SRO of those regulatory responsibilities allocated by the plan to another SRO. --------------------------------------------------------------------------- \10\ See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). --------------------------------------------------------------------------- II. The Plan On December 3, 2010, the Commission approved the SRO participants' plan for allocating regulatory responsibilities pursuant to Rule 17d- 2.\11\ On October 29, 2015, the Commission approved an amended plan that added Regulation NMS Rules 606, 607, and 611(c) and (d) and added additional Participating Organizations that are options markets to the Plan.\12\ --------------------------------------------------------------------------- \11\ See Securities Exchange Act Release No. 63430, 75 FR 76758 (December 9, 2010). \12\ See Securities Exchange Act Release No. 76311, 80 FR 68377 (November 4, 2015). --------------------------------------------------------------------------- The proposed 17d-2 Plan is intended to reduce regulatory duplication for firms that are members of more than one Participating Organization.\13\ The Plan provides for the allocation of regulatory responsibility according to whether the covered rule pertains to NMS stocks or NMS securities. For covered rules that pertain to NMS stocks (i.e., Rules 607, 611, and 612), FINRA serves as the ``Designated Regulation NMS Examining Authority'' (``DREA'') for common members that are members of FINRA, and assumes certain examination and enforcement responsibilities for those members with respect to specified Regulation NMS rules. For common members that are not members of FINRA, the member's DEA serves as the DREA, provided that the DEA exchange operates a national securities exchange or facility that trades NMS stocks and the common member is a member of such exchange or facility. Section 1(c) of the Plan contains a list of principles that are applicable to the allocation of common members in cases not specifically addressed in the Plan. An exchange that does not trade NMS stocks would have no regulatory authority for covered Regulation NMS rules pertaining to NMS stocks. For covered rules that pertain to NMS securities, and thus include options (i.e., Rule 606), the Plan provides that the DREA will be the same as the DREA for the rules pertaining to NMS stocks. For common members that are not members of an exchange that trades NMS stocks, the common member would be allocated according to the principles set forth in Section 1(c) of the Plan. --------------------------------------------------------------------------- \13\ The proposed 17d-2 Plan refers to these members as ``Common Members.'' --------------------------------------------------------------------------- The text of the Plan delineates the proposed regulatory responsibilities with respect to the Parties. Included in the proposed Plan is an exhibit (the ``Covered Regulation NMS Rules'') that lists the federal securities laws, rules, and regulations, for which the applicable DREA would bear examination and enforcement responsibility under the Plan for common members of the Participating Organization and their associated persons. Specifically, the applicable DREA assumes examination and enforcement responsibility relating to compliance by common members with the Covered Regulation NMS Rules. Covered Regulation NMS Rules do not include the application of any rule of a Participating Organization, or any rule or regulation under the Act, to the extent that it pertains to violations of [[Page 54907]] insider trading activities, because such matters are covered by a separate multiparty agreement under Rule 17d-2.\14\ Under the Plan, Participating Organizations retain full responsibility for surveillance and enforcement with respect to trading activities or practices involving their own marketplace.\15\ --------------------------------------------------------------------------- \14\ See Securities Exchange Act Release No. 58350 (August 13, 2008), 73 FR 48247 (August 18, 2008) (File No. 4-566) (notice of filing of proposed plan). See also Securities Exchange Act Release No. 58536 (September 12, 2008) (File No. 4-566) (order approving and declaring effective the plan). \15\ See paragraph 1 of the proposed 17d-2 Plan. --------------------------------------------------------------------------- III. Proposed Amendment to the Plan On August 4, 2016, the parties submitted a proposed amendment to the Plan. The primary purpose of the amendment is to add IEX and ISE Mercury as Participants to the Plan and to reflect name changes of certain Participating Organizations. The text of the proposed amended 17d-2 Plan is as follows (additions are in italics; deletions are in brackets): * * * * * Agreement for the Allocation of Regulatory Responsibility for the Covered Regulation NMS Rules Pursuant to Sec. 17(d) of the Securities Exchange Act of 1934, 15 U.S.C. 78q(d), and Rule 17d-2 Thereunder This agreement (the ``Agreement'') by and among [BATS]Bats BZX Exchange, Inc. (``BATS''), [BATS Y-]Bats BYX Exchange, Inc. (``BATS Y''), BOX Options Exchange LLC (``BOX''), Chicago Board Options Exchange, Incorporated (``CBOE''), C2 Options Exchange, Incorporated (``C2''), Chicago Stock Exchange, Inc. (``CHX''), Bats EDGA Exchange, Inc. (``EDGA''), Bats EDGX Exchange, Inc. (``EDGX''), Financial Industry Regulatory Authority, Inc. (``FINRA''), International Securities Exchange, LLC (``ISE''), ISE Gemini, LLC (``ISE Gemini''), ISE Mercury, LLC (``ISE Mercury''), Investors Exchange LLC (``IEX''), Miami International Securities Exchange, LLC (``MIAX''), The NASDAQ Stock Market LLC (``NASDAQ''), NASDAQ [OMX] BX, Inc. (``BX''), NASDAQ [OMX] PHLX, Inc. (``PHLX''), National Stock Exchange, Inc. (``NSX''), New York Stock Exchange LLC (``NYSE''), NYSE MKT LLC (``NYSE MKT''), and NYSE Arca, Inc. (``NYSE Arca'') (each, a ``Participating Organization,'' and, together, the ``Participating Organizations''), is made pursuant to Sec. 17(d) of the Securities Exchange Act of 1934 (the ``Act'' or ``SEA''), 15 U.S.C. 78q(d), and Rule 17d-2 thereunder, which allow for plans to allocate regulatory responsibility among self- regulatory organizations (``SROs''). Upon approval by the Securities and Exchange Commission (``Commission'' or ``SEC''), this Agreement shall amend and restate the agreement by and among the Participating Organizations approved by the SEC on [December 3, 2010] October 29, 2015. WHEREAS, the Participating Organizations desire to: (a) Foster cooperation and coordination among the SROs; (b) remove impediments to, and foster the development of, a national market system; (c) strive to protect the interest of investors; and (d) eliminate duplication in their examination and enforcement of SEA Rules 606, 607, 611 and 612 (the ``Covered Regulation NMS Rules''); WHEREAS, the Participating Organizations are interested in allocating regulatory responsibilities with respect to broker-dealers that are members of more than one Participating Organization (the ``Common Members'') relating to the examination and enforcement of the Covered Regulation NMS Rules; and WHEREAS, the Participating Organizations will request regulatory allocation of these regulatory responsibilities by executing and filing with the SEC this plan for the above stated purposes pursuant to the provisions of Sec. 17(d) of the Act, and Rule 17d-2 thereunder, as described below. NOW, THEREFORE, in consideration of the mutual covenants contained hereafter, and other valuable consideration to be mutually exchanged, the Participating Organizations hereby agree as follows: 1. Assumption of Regulatory Responsibility. The Designated Regulation NMS Examining Authority (the ``DREA'') shall assume examination and enforcement responsibilities relating to compliance by Common Members with the Covered Regulation NMS Rules to which the DREA is allocated responsibility (``Regulatory Responsibility''). A list of the Covered Regulation NMS Rules is attached hereto as Exhibit A. a. For Covered Regulation NMS Rules Pertaining to ``NMS stocks'' (as defined in Regulation NMS) (i.e., Rules 607, 611 and 612): FINRA shall serve as DREA for Common Members that are members of FINRA. The Designated Examining Authority (``DEA'') pursuant to SEA Rule 17d-1 shall serve as DREA for Common Members that are not members of FINRA, provided that the DEA operates a national securities exchange or facility that trades NMS stocks and the Common Member is a member of such exchange or facility. For all other Common Members, the Participating Organizations shall allocate Common Members among the Participating Organizations (other than FINRA) that operate a national securities exchange that trades NMS stocks based on the principles outlined below and the Participating Organization to which such a Common Member is allocated shall serve as the DREA for that Common Member. (A Participating Organization that operates a national securities exchange that does not trade NMS stocks has no regulatory responsibilities related to Covered Regulation NMS Rules pertainining to NMS stocks and will not serve as DREA for such Covered Regulation NMS Rules.) b. For Covered Regulation NMS Rules Pertaining to ``NMS securities'' (as defined in Regulation NMS) (i.e., Rule 606), the DREA shall be same as the DREA for Covered Regulation NMS Rules pertaining to NMS stocks. For Common Members that are not members of a national securities exchange that trades NMS stocks and thus have not been appointed a DREA under paragraph a., the Participating Organizations shall allocate the Common Members among the Participating Organizations (other than FINRA) that operate a national securities exchange that trades NMS securities based on the principles outlined below and the Participating Organization to which such a Common Member is allocated shall serve as the DREA for that Common Member with respect to Covered Regulation NMS Rules pertaining to NMS securities. The allocation of Common Members to DREAs (including FINRA) for all Covered Regulation NMS Rules is provided in Exhibit B. c. For purposes of this paragraph 1, any allocation of a Common Member to a Participating Organization other than as specified in paragraphs a. and b. above shall be based on the following principles, except to the extent all affected Participating Organizations consent to one or more different principles and any such agreement to different principles would be deemed an amendment to this Agreement as provided in paragraph 22: i. The Participating Organizations shall not allocate a Common Member to a Participating Organization unless the Common Member is a member of that Participating Organization. ii. To the extent practicable, Common Members shall be allocated among the Participating Organizations of which they are members in such a manner as to equalize, as nearly as possible, the [[Page 54908]] allocation among such Participating Organizations. iii. To the extent practicable, the allocation will take into account the amount of NMS stock activity (or NMS security activity, as applicable) conducted by each Common Member in order to most evenly divide the Common Members with the largest amount of activity among the Participating Organizations of which they are a members. The allocation will also take into account similar allocations pursuant to other plans or agreements to which the Participating Organizations are party to maintain consistency in oversight of the Common Members.\1\ --------------------------------------------------------------------------- \1\ For example, if one Participating Organization was allocated responsibility for a particular Common Member pursuant to a separate Rule 17d-2 Agreement, that Participant Organization would be assigned to be the DREA of that Common Member, unless there is good cause not to make that assignment. --------------------------------------------------------------------------- iv. The Participating Organizations may reallocate Common Members from time-to-time and in such manner as they deem appropriate consistent with the terms of this Agreement. v. Whenever a Common Member ceases to be a member of its DREA (including FINRA), the DREA shall promptly inform the Participating Organizations, who shall review the matter and reallocate the Common Member to another Participating Organization. vi. The DEA or DREA (including FINRA) may request that a Common Member be reallocated to another Participating Organization (including the DEA or DREA (including FINRA)) by giving 30 days written notice to the Participating Organizations. The Participating Organizations shall promptly consider such request and, in their discretion, may approve or disapprove such request and if approved, reallocate the Common Member to such Participating Organization. vii. All determinations by the Participating Organizations with respect to allocations shall be by the affirmative vote of a majority of the Participating Organizations that, at the time of such determination, share the applicable Common Member being allocated; a Participating Organization shall not be entitled to vote on any allocation related to a Common Member unless the Common Member is a member of such Participating Organization. d. The Participating Organizations agree that they shall conduct meetings among them as needed for the purposes of ensuring proper allocation of Common Members and identifying issues or concerns with respect to the regulation of Common Members. Notwithstanding anything herein to the contrary, it is explicitly understood that the term ``Regulatory Responsibility'' does not include, and each of the Participating Organizations shall retain full responsibility for, examination, surveillance and enforcement with respect to trading activities or practices involving its own marketplace unless otherwise allocated pursuant to a separate Rule 17d-2 Agreement. 2. No Retention of Regulatory Responsibility. The Participating Organizations do not contemplate the retention of any responsibilities with respect to the regulatory activities being assumed by the DREA under the terms of this Agreement. Nothing in this Agreement will be interpreted to prevent a DREA from entering into Regulatory Services Agreement(s) to perform its Regulatory Responsibility. 3. No Charge. A DREA shall not charge Participating Organizations for performing the Regulatory Responsibility under this Agreement. 4. Applicability of Certain Laws, Rules, Regulations or Orders. Notwithstanding any provision hereof, this Agreement shall be subject to any statute, or any rule or order of the SEC. To the extent such statute, rule, or order is inconsistent with one or more provisions of this Agreement, the statute, rule, or order shall supersede the provision(s) hereof to the extent necessary to be properly effectuated and the provision(s) hereof in that respect shall be null and void. 5. Customer Complaints. If a Participating Organization receives a copy of a customer complaint relating to a DREA's Regulatory Responsibility as set forth in this Agreement, the Participating Organization shall promptly forward to such DREA a copy of such customer complaint. It shall be such DREA's responsibility to review and take appropriate action in respect to such complaint. 6. Parties to Make Personnel Available as Witnesses. Each Participating Organization shall make its personnel available to the DREA to serve as testimonial or non-testimonial witnesses as necessary to assist the DREA in fulfilling the Regulatory Responsibility allocated under this Agreement. The DREA shall provide reasonable advance notice when practicable and shall work with a Participating Organization to accommodate reasonable scheduling conflicts within the context and demands as the entity with ultimate regulatory responsibility. The Participating Organization shall pay all reasonable travel and other expenses incurred by its employees to the extent that the DREA requires such employees to serve as witnesses, and provide information or other assistance pursuant to this Agreement. 7. Sharing of Work-Papers, Data and Related Information. a. Sharing. A Participating Organization shall make available to the DREA information necessary to assist the DREA in fulfilling the Regulatory Responsibility assumed under the terms of this Agreement. Such information shall include any information collected by a Participating Organization in the course of performing its regulatory obligations under the Act, including information relating to an on- going disciplinary investigation or action against a member, the amount of a fine imposed on a member, financial information, or information regarding proprietary trading systems gained in the course of examining a member (``Regulatory Information''). This Regulatory Information shall be used by the DREA solely for the purposes of fulfilling the DREA's Regulatory Responsibility. b. No Waiver of Privilege. The sharing of documents or information between the parties pursuant to this Agreement shall not be deemed a waiver as against third parties of regulatory or other privileges relating to the discovery of documents or information. 8. Special or Cause Examinations and Enforcement Proceedings. Nothing in this Agreement shall restrict or in any way encumber the right of a Participating Organization to conduct special or cause examinations of a Common Member, or take enforcement proceedings against a Common Member as a Participating Organization, in its sole discretion, shall deem appropriate or necessary. 9. Dispute Resolution Under This Agreement. a. Negotiation. The Participating Organizations will attempt to resolve any disputes through good faith negotiation and discussion, escalating such discussion up through the appropriate management levels until reaching the executive management level. In the event a dispute cannot be settled through these means, the Participating Organizations shall refer the dispute to binding arbitration. b. Binding Arbitration. All claims, disputes, controversies, and other matters in question between the Participating Organizations to this Agreement arising out of or relating to this Agreement or the breach thereof that cannot be resolved by the Participating Organizations will be resolved through binding arbitration. [[Page 54909]] Unless otherwise agreed by the Participating Organizations, a dispute submitted to binding arbitration pursuant to this paragraph shall be resolved using the following procedures: (i) The arbitration shall be conducted in a city selected by the DREA in which it maintains a principal office or where otherwise agreed to by the Participating Organizations in accordance with the Commercial Arbitration Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof; and (ii) There shall be three arbitrators, and the chairperson of the arbitration panel shall be an attorney. The arbitrators shall be appointed in accordance with the Commercial Arbitration Rules of the American Arbitration Association. 10. Limitation of Liability. As between the Participating Organizations, no Participating Organization, including its respective directors, governors, officers, employees and agents, will be liable to any other Participating Organization, or its directors, governors, officers, employees and agents, for any liability, loss or damage resulting from any delays, inaccuracies, errors or omissions with respect to its performing or failing to perform regulatory responsibilities, obligations, or functions, except: (a) As otherwise provided for under the Act; (b) in instances of a Participating Organization's gross negligence, willful misconduct or reckless disregard with respect to another Participating Organization; or (c) in instances of a breach of confidentiality obligations owed to another Participating Organization. The Participating Organizations understand and agree that the regulatory responsibilities are being performed on a good faith and best effort basis and no warranties, express or implied, are made by any Participating Organization to any other Participating Organization with respect to any of the responsibilities to be performed hereunder. This paragraph is not intended to create liability of any Participating Organization to any third party. 11. SEC Approval. a. The Participating Organizations agree to file promptly this Agreement with the SEC for its review and approval. FINRA shall file this Agreement on behalf, and with the explicit consent, of all Participating Organizations. b. If approved by the SEC, the Participating Organizations will notify their members of the general terms of the Agreement and of its impact on their members. 12. Subsequent Parties; Limited Relationship. This Agreement shall inure to the benefit of and shall be binding upon the Participating Organizations hereto and their respective legal representatives, successors, and assigns. Nothing in this Agreement, expressed or implied, is intended or shall: (a) Confer on any person other than the Participating Organizations hereto, or their respective legal representatives, successors, and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, (b) constitute the Participating Organizations hereto partners or participants in a joint venture, or (c) appoint one Participating Organization the agent of the other. 13. Assignment. No Participating Organization may assign this Agreement without the prior written consent of the DREAs performing Regulatory Responsibility on behalf of such Participating Organization, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that any Participating Organization may assign the Agreement to a corporation controlling, controlled by or under common control with the Participating Organization without the prior written consent of such Participating Organization's DREAs. No assignment shall be effective without Commission approval. 14. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. 15. Termination. Any Participating Organization may cancel its participation in the Agreement at any time upon the approval of the Commission after 180 days written notice to the other Participating Organizations (or in the case of a change of control in ownership of a Participating Organization, such other notice time period as that Participating Organization may choose). The cancellation of its participation in this Agreement by any Participating Organization shall not terminate this Agreement as to the remaining Participating Organizations. 16. General. The Participating Organizations agree to perform all acts and execute all supplementary instruments or documents that may be reasonably necessary or desirable to carry out the provisions of this Agreement. 17. Written Notice. Any written notice required or permitted to be given under this Agreement shall be deemed given if sent by certified mail, return receipt requested, or by a comparable means of electronic communication to each Participating Organization entitled to receipt thereof, to the attention of the Participating Organization's representative at the Participating Organization's then principal office or by email. 18. Confidentiality. The Participating Organizations agree that documents or information shared shall be held in confidence, and used only for the purposes of carrying out their respective regulatory obligations under this Agreement, provided, however, that each Participating Organization may disclose such documents or information as may be required to comply with applicable requlatory requirements or requests for information from the SEC. Any Participating Organization disclosing confidential documents or information in compliance with applicable regulatory or oversight requirements will request confidential treatment of such information. No Participating Organization shall assert regulatory or other privileges as against the other with respect to Regulatory Information that is required to be shared pursuant to this Agreement. 19. Regulatory Responsibility. Pursuant to Section 17(d)(1)(A) of the Act, and Rule 17d-2 thereunder, the Participating Organizations request the SEC, upon its approval of this Agreement, to relieve the Participating Organizations which are participants in this Agreement that are not the DREA as to a Common Member of any and all responsibilities with respect to the matters allocated to the DREA pursuant to this Agreement for purposes of Sec. Sec. 17(d) and 19(g) of the Act. 20. Governing Law. This Agreement shall be deemed to have been made in the State of New York, and shall be construed and enforced in accordance with the law of the State of New York, without reference to principles of conflicts of laws thereof. Each of the Participating Organizations hereby consents to submit to the jurisdiction of the courts of the State of New York in connection with any action or proceeding relating to this Agreement. 21. Survival of Provisions. Provisions intended by their terms or context to survive and continue notwithstanding delivery of the regulatory services by the [[Page 54910]] DREA and any expiration of this Agreement shall survive and continue. 22. Amendment. a. This Agreement may be amended to add a new Participating Organization, provided that such Participating Organization does not assume regulatory responsibility, by an amendment executed by all applicable DREAs and such new Participating Organization. All other Participating Organizations expressly consent to allow such DREAs to jointly add new Participating Organizations to the Agreement as provided above. Such DREAs will promptly notify all Participating Organizations of any such amendments to add a new Participating Organization. b. All other amendments must be approved by each Participating Organization. All amendments, including adding a new Participating Organization but excluding changes to Exhibit B, must be filed with and approved by the Commission before they become effective. 23. Effective Date. The Effective Date of this Agreement will be the date the SEC declares this Agreement to be effective pursuant to authority conferred by Sec. 17(d) of the Act, and Rule 17d-2 thereunder. 24. Counterparts. This Agreement may be executed in any number of counterparts, including facsimile, each of which will be deemed an original, but all of which taken together shall constitute one single agreement among the Participating Organizations. * * * * * Exhibit A Covered Regulation NMS Rules SEA Rule 606--Disclosure of Order Routing Information.* SEA Rule 607--Customer Account Statements. SEA Rule 611--Order Protection Rule. SEA Rule 612--Minimum Pricing Increment. * Covered Regulation NMS Rules with asterisks (*) pertain to NMS securities. Covered Regulation NMS Rules without asterisks pertain to NMS stocks. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number 4-618 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number 4-618. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed plan that are filed with the Commission, and all written communications relating to the proposed plan between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the plan also will be available for inspection and copying at the principal offices of the Participating Organizations. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number 4-618 and should be submitted on or before September 7, 2016. V. Discussion The Commission finds that the Plan, as amended, is consistent with the factors set forth in Section 17(d) of the Act \16\ and Rule 17d- 2(c) thereunder \17\ in that the proposed amended Plan is necessary or appropriate in the public interest and for the protection of investors, fosters cooperation and coordination among SROs, and removes impediments to and fosters the development of the national market system. In particular, the Commission believes that the proposed amended Plan should reduce unnecessary regulatory duplication by allocating to the applicable DREA certain examination and enforcement responsibilities for Common Members that would otherwise be performed by multiple Parties. Accordingly, the proposed amended Plan promotes efficiency by reducing costs to Common Members. Furthermore, because the Parties will coordinate their regulatory functions in accordance with the proposed amended Plan, the amended Plan should promote investor protection. --------------------------------------------------------------------------- \16\ 15 U.S.C. 78q(d). \17\ 17 CFR 240.17d-2(c). --------------------------------------------------------------------------- The Commission is hereby declaring effective a plan that allocates regulatory responsibility for certain provisions of the federal securities laws, rules, and regulations as set forth in Exhibit A to the Plan. The Commission notes that any amendment to the Plan must be approved by the relevant Parties as set forth in Paragraph 22 of the Plan and must be filed with and approved by the Commission before it may become effective.\18\ --------------------------------------------------------------------------- \18\ See Paragraph 22 of the Plan. The Commission notes, however, that changes to Exhibit B to the Plan (the allocation of Common Members to DREAs) are not required to be filed with, and approved by, the Commission before they become effective. --------------------------------------------------------------------------- Under paragraph (c) of Rule 17d-2, the Commission may, after appropriate notice and comment, declare a plan, or any part of a plan, effective. In this instance, the Commission believes that appropriate notice and comment can take place after the proposed amendment is effective. In particular, the purpose of the amendment is to add IEX and ISE Mercury as Participating Organizations and to reflect name changes of certain Participating Organizations. The Commission notes that the most recent prior amendment to the Plan was published for comment and the Commission did not receive any comments thereon.\19\ The Commission believes that the current amendment to the Plan does not raise any new regulatory issues that the Commission has not previously considered, and therefore believes that the amended Plan should become effective without any undue delay. --------------------------------------------------------------------------- \19\ See Securities Exchange Act Release No. 76311 (October 29, 2015), 80 FR 68377 (November 4, 2015). --------------------------------------------------------------------------- VI. Conclusion This order gives effect to the amended Plan filed with the Commission that is contained in File No. 4-618. IT IS THEREFORE ORDERED, pursuant to Section 17(d) of the Act, that the Plan, as amended, filed with the Commission pursuant to Rule 17d-2 on August 4, 2016, is hereby approved and declared effective. IT IS FURTHER ORDERED that those SRO participants that are not the DREA as to a particular common member are [[Page 54911]] relieved of those regulatory responsibilities allocated to the common member's DREA under the amended Plan to the extent of such allocation. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\20\ --------------------------------------------------------------------------- \20\ 17 CFR 200.30-3(a)(34). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-19582 Filed 8-16-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 159 / Wednesday, August 17, 2016 / Notices 54905
imposes powerful restraints on the IV. Solicitation of Comments For the Commission, by the Division of
ability of any exchange to charge Trading and Markets, pursuant to delegated
unreasonable fees for connectivity. Interested persons are invited to authority.12
submit written data, views, and Robert W. Errett,
B. Self-Regulatory Organization’s arguments concerning the foregoing, Deputy Secretary.
Statement on Burden on Competition including whether the proposed rule [FR Doc. 2016–19574 Filed 8–16–16; 8:45 am]
The Exchange believes its proposed change is consistent with the Act. BILLING CODE 8011–01–P
amendment to its fee schedule would Comments may be submitted by any of
not impose any burden on competition the following methods:
that is not necessary or appropriate in SECURITIES AND EXCHANGE
Electronic Comments COMMISSION
furtherance of the purposes of the Act
in that it is simply designed to set forth • Use the Commission’s Internet [Release No. 34–78552; File No. 4–618]
the Exchange’s pro-rata billing for comment form (http://www.sec.gov/
logical ports and is similar to that rules/sro.shtml); or Program for Allocation of Regulatory
currently offered by one of the Responsibilities Pursuant to Rule 17d–
Exchange’s competitors.9 Members may • Send an email to rule-comments@ 2; Notice of Filing and Order
opt to disfavor the Exchange’s pricing if sec.gov. Please include File Number SR– Approving and Declaring Effective an
they believe that alternatives offer them BatsBZX–2016–45 on the subject line. Amendment to the Plan for the
better value. Accordingly, the Exchange Paper Comments Allocation of Regulatory
does not believe that the proposed Responsibilities Between Bats BZX
change will impair the ability of • Send paper comments in triplicate Exchange, Inc., Bats BYX Exchange,
Members or competing venues to to Secretary, Securities and Exchange Inc., BOX Options Exchange LLC,
maintain their competitive standing in Commission, 100 F Street NE., Chicago Board Options Exchange,
the financial markets. Washington, DC 20549–1090. Incorporated, C2 Options Exchange,
The Exchange believes that fees for Incorporated, Chicago Stock
All submissions should refer to File Exchange, Inc., Bats EDGA Exchange,
connectivity are constrained by the Number SR–BatsBZX–2016–45. This file
robust competition for order flow among Inc., Bats EDGX Exchange, Inc.,
number should be included on the Financial Industry Regulatory
exchanges and non-exchange markets. subject line if email is used. To help the
Further, excessive fees for connectivity, Authority, Inc., International Securities
Commission process and review your Exchange, LLC, Investors Exchange
including logical port fees, would serve
comments more efficiently, please use LLC, ISE Gemini, LLC, ISE Mercury,
to impair an exchange’s ability to
only one method. The Commission will LLC, Miami International Securities
compete for order flow rather than
burdening competition. The Exchange post all comments on the Commission’s Exchange, LLC, The NASDAQ Stock
also does not believe the proposed rule Internet Web site (http://www.sec.gov/ Market LLC, NASDAQ BX, Inc.,
change would impact intramarket rules/sro.shtml). Copies of the NASDAQ PHLX, Inc., National Stock
competition as it would apply to all submission, all subsequent Exchange, Inc., New York Stock
Members and non-Members equally. amendments, all written statements Exchange LLC, NYSE MKT LLC, and
with respect to the proposed rule NYSE Arca, Inc.
C. Self-Regulatory Organization’s change that are filed with the
Statement on Comments on the August 11, 2016.
Commission, and all written Notice is hereby given that the
Proposed Rule Change Received From communications relating to the
Members, Participants, or Others Securities and Exchange Commission
proposed rule change between the (‘‘Commission’’) has issued an Order,
The Exchange has not solicited, and Commission and any person, other than pursuant to Section 17(d) of the
does not intend to solicit, comments on those that may be withheld from the Securities Exchange Act of 1934
this proposed rule change. The public in accordance with the (‘‘Act’’),1 approving and declaring
Exchange has not received any written provisions of 5 U.S.C. 552, will be effective an amendment to the plan for
comments from members or other available for Web site viewing and allocating regulatory responsibility
interested parties. printing in the Commission’s Public (‘‘Plan’’) filed on August 4, 2016,
III. Date of Effectiveness of the Reference Room, 100 F Street NE., pursuant to Rule 17d–2 of the Act,2 by
Proposed Rule Change and Timing for Washington, DC 20549, on official Bats BZX Exchange, Inc. (‘‘BATS’’), Bats
Commission Action business days between the hours of BYX Exchange, Inc. (‘‘BATS Y’’), BOX
10:00 a.m. and 3:00 p.m. Copies of the Options Exchange LLC (‘‘BOX’’),
The foregoing rule change has become filing also will be available for Chicago Board Options Exchange,
effective pursuant to Section 19(b)(3)(A) inspection and copying at the principal Incorporated (‘‘CBOE’’), C2 Options
of the Act 10 and paragraph (f) of Rule office of the Exchange. All comments Exchange, Incorporated (‘‘C2’’), Chicago
19b–4 thereunder.11 At any time within received will be posted without change; Stock Exchange, Inc. (‘‘CHX’’), Bats
60 days of the filing of the proposed rule the Commission does not edit personal EDGA Exchange, Inc. (‘‘EDGA’’), Bats
change, the Commission summarily may EDGX Exchange, Inc. (‘‘EDGX’’),
identifying information from
temporarily suspend such rule change if Financial Industry Regulatory
submissions. You should submit only
it appears to the Commission that such Authority, Inc. (‘‘FINRA’’), International
information that you wish to make
mstockstill on DSK3G9T082PROD with NOTICES
action is necessary or appropriate in the Securities Exchange, LLC (‘‘ISE’’),
public interest, for the protection of available publicly. All submissions
Investors Exchange LLC (‘‘IEX’’), ISE
investors, or otherwise in furtherance of should refer to File Number SR–
Gemini, LLC (‘‘ISE Gemini’’), ISE
the purposes of the Act. BatsBZX–2016–45, and should be
Mercury, LLC (‘‘ISE Mercury’’), Miami
submitted on or before September 7,
9 Id. 2016. 12 17 CFR 200.30–3(a)(12).
10 15 U.S.C. 78s(b)(3)(A). 1 15 U.S.C. 78q(d).
11 17 CFR 240.19b–4(f). 2 17 CFR 240.17d–2.
VerDate Sep<11>2014 16:39 Aug 16, 2016 Jkt 238001 PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 E:\FR\FM\17AUN1.SGM 17AUN1](https://thefederalregister.org/doc/81_FR_55064/page/1.svg)
![Federal Register / Vol. 81, No. 159 / Wednesday, August 17, 2016 / Notices 54907
insider trading activities, because such regulatory organizations (‘‘SROs’’). Common Members, the Participating
matters are covered by a separate Upon approval by the Securities and Organizations shall allocate Common
multiparty agreement under Rule 17d– Exchange Commission (‘‘Commission’’ Members among the Participating
2.14 Under the Plan, Participating or ‘‘SEC’’), this Agreement shall amend Organizations (other than FINRA) that
Organizations retain full responsibility and restate the agreement by and among operate a national securities exchange
for surveillance and enforcement with the Participating Organizations that trades NMS stocks based on the
respect to trading activities or practices approved by the SEC on [December 3, principles outlined below and the
involving their own marketplace.15 2010] October 29, 2015. Participating Organization to which
WHEREAS, the Participating such a Common Member is allocated
III. Proposed Amendment to the Plan Organizations desire to: (a) Foster shall serve as the DREA for that
On August 4, 2016, the parties cooperation and coordination among the Common Member. (A Participating
submitted a proposed amendment to the SROs; (b) remove impediments to, and Organization that operates a national
Plan. The primary purpose of the foster the development of, a national securities exchange that does not trade
amendment is to add IEX and ISE market system; (c) strive to protect the NMS stocks has no regulatory
Mercury as Participants to the Plan and interest of investors; and (d) eliminate responsibilities related to Covered
to reflect name changes of certain duplication in their examination and Regulation NMS Rules pertainining to
Participating Organizations. enforcement of SEA Rules 606, 607, 611 NMS stocks and will not serve as DREA
The text of the proposed amended and 612 (the ‘‘Covered Regulation NMS for such Covered Regulation NMS
17d–2 Plan is as follows (additions are Rules’’); Rules.)
in italics; deletions are in brackets): WHEREAS, the Participating b. For Covered Regulation NMS Rules
* * * * * Organizations are interested in Pertaining to ‘‘NMS securities’’ (as
allocating regulatory responsibilities defined in Regulation NMS) (i.e., Rule
Agreement for the Allocation of with respect to broker-dealers that are
Regulatory Responsibility for the 606), the DREA shall be same as the
members of more than one Participating DREA for Covered Regulation NMS
Covered Regulation NMS Rules Organization (the ‘‘Common Members’’)
Pursuant to § 17(d) of the Securities Rules pertaining to NMS stocks. For
relating to the examination and Common Members that are not members
Exchange Act of 1934, 15 U.S.C. 78q(d), enforcement of the Covered Regulation
and Rule 17d–2 Thereunder of a national securities exchange that
NMS Rules; and
trades NMS stocks and thus have not
This agreement (the ‘‘Agreement’’) by WHEREAS, the Participating
and among [BATS]Bats BZX Exchange, been appointed a DREA under
Organizations will request regulatory
Inc. (‘‘BATS’’), [BATS Y–]Bats BYX allocation of these regulatory paragraph a., the Participating
Exchange, Inc. (‘‘BATS Y’’), BOX responsibilities by executing and filing Organizations shall allocate the
Options Exchange LLC (‘‘BOX’’), with the SEC this plan for the above Common Members among the
Chicago Board Options Exchange, stated purposes pursuant to the Participating Organizations (other than
Incorporated (‘‘CBOE’’), C2 Options provisions of § 17(d) of the Act, and FINRA) that operate a national
Exchange, Incorporated (‘‘C2’’), Chicago Rule 17d–2 thereunder, as described securities exchange that trades NMS
Stock Exchange, Inc. (‘‘CHX’’), Bats below. securities based on the principles
EDGA Exchange, Inc. (‘‘EDGA’’), Bats NOW, THEREFORE, in consideration outlined below and the Participating
EDGX Exchange, Inc. (‘‘EDGX’’), of the mutual covenants contained Organization to which such a Common
Financial Industry Regulatory hereafter, and other valuable Member is allocated shall serve as the
Authority, Inc. (‘‘FINRA’’), International consideration to be mutually exchanged, DREA for that Common Member with
Securities Exchange, LLC (‘‘ISE’’), ISE the Participating Organizations hereby respect to Covered Regulation NMS
Gemini, LLC (‘‘ISE Gemini’’), ISE agree as follows: Rules pertaining to NMS securities. The
Mercury, LLC (‘‘ISE Mercury’’), Investors 1. Assumption of Regulatory allocation of Common Members to
Exchange LLC (‘‘IEX’’), Miami Responsibility. The Designated DREAs (including FINRA) for all
International Securities Exchange, LLC Regulation NMS Examining Authority Covered Regulation NMS Rules is
(‘‘MIAX’’), The NASDAQ Stock Market (the ‘‘DREA’’) shall assume examination provided in Exhibit B.
LLC (‘‘NASDAQ’’), NASDAQ [OMX] and enforcement responsibilities c. For purposes of this paragraph 1,
BX, Inc. (‘‘BX’’), NASDAQ [OMX] relating to compliance by Common any allocation of a Common Member to
PHLX, Inc. (‘‘PHLX’’), National Stock Members with the Covered Regulation a Participating Organization other than
Exchange, Inc. (‘‘NSX’’), New York NMS Rules to which the DREA is as specified in paragraphs a. and b.
Stock Exchange LLC (‘‘NYSE’’), NYSE allocated responsibility (‘‘Regulatory above shall be based on the following
MKT LLC (‘‘NYSE MKT’’), and NYSE Responsibility’’). A list of the Covered principles, except to the extent all
Arca, Inc. (‘‘NYSE Arca’’) (each, a Regulation NMS Rules is attached affected Participating Organizations
‘‘Participating Organization,’’ and, hereto as Exhibit A. consent to one or more different
together, the ‘‘Participating a. For Covered Regulation NMS Rules principles and any such agreement to
Organizations’’), is made pursuant to Pertaining to ‘‘NMS stocks’’ (as defined different principles would be deemed
§ 17(d) of the Securities Exchange Act of in Regulation NMS) (i.e., Rules 607, 611 an amendment to this Agreement as
1934 (the ‘‘Act’’ or ‘‘SEA’’), 15 U.S.C. and 612): FINRA shall serve as DREA provided in paragraph 22:
78q(d), and Rule 17d–2 thereunder, for Common Members that are members i. The Participating Organizations
which allow for plans to allocate of FINRA. The Designated Examining shall not allocate a Common Member to
Authority (‘‘DEA’’) pursuant to SEA a Participating Organization unless the
mstockstill on DSK3G9T082PROD with NOTICES
regulatory responsibility among self-
Rule 17d–1 shall serve as DREA for Common Member is a member of that
14 See Securities Exchange Act Release No. 58350 Common Members that are not members Participating Organization.
(August 13, 2008), 73 FR 48247 (August 18, 2008) of FINRA, provided that the DEA ii. To the extent practicable, Common
(File No. 4–566) (notice of filing of proposed plan). operates a national securities exchange Members shall be allocated among the
See also Securities Exchange Act Release No. 58536
(September 12, 2008) (File No. 4–566) (order or facility that trades NMS stocks and Participating Organizations of which
approving and declaring effective the plan). the Common Member is a member of they are members in such a manner as
15 See paragraph 1 of the proposed 17d–2 Plan. such exchange or facility. For all other to equalize, as nearly as possible, the
VerDate Sep<11>2014 16:39 Aug 16, 2016 Jkt 238001 PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 E:\FR\FM\17AUN1.SGM 17AUN1](https://thefederalregister.org/doc/81_FR_55064/page/3.svg)
![Federal Register / Vol. 81, No. 159 / Wednesday, August 17, 2016 / Notices 54911
relieved of those regulatory any comments it received on the both the Market Maker’s bid and the
responsibilities allocated to the common proposed rule change. The text of these offer must be in compliance with the
member’s DREA under the amended statements may be examined at the requirements of Rule 604(b)(2).8 Third,
Plan to the extent of such allocation. places specified in Item IV below. The the bid/ask differential of a Market
For the Commission, by the Division of Exchange has prepared summaries, set Maker’s two-sided quote pair must meet
Trading and Markets, pursuant to delegated forth in sections A, B, and C below, of the priority quote width requirements as
authority.20 the most significant aspects of such defined by rule 9 for each option.
Robert W. Errett, statements. Fourth, at the time a locking or crossing
Deputy Secretary. quote or order enters the System,10 the
A. Self-Regulatory Organization’s Market Maker’s two-sided quote pair
[FR Doc. 2016–19582 Filed 8–16–16; 8:45 am] Statement of the Purpose of, and must be valid width for that option and
BILLING CODE 8011–01–P Statutory Basis for, the Proposed Rule must have been resting on the Book or,11
Change immediately prior to the time the
SECURITIES AND EXCHANGE 1. Purpose Market Maker enters a new quote that
COMMISSION locks or crosses the MBBO,12 the Market
The Exchange proposes to amend
Maker must have had a valid width
[Release No. 34–78547; File No. SR–MIAX– Exchange Rule 517, Quote Types
quote already existing (i.e., exclusive of
2016–24] Defined, to adopt new Interpretations
the Market Maker’s new marketable
and Policies .01 to clarify that to be
Self-Regulatory Organizations; Miami quote or update) among his two-sided
considered a priority quote (as
International Securities Exchange LLC; quotes for that option.13
described below), a quote for a long- The Exchange notes that strike price
Notice of Filing and Immediate term option contract 3 must meet the interval, bid/ask differential and
Effectiveness of a Proposed Rule priority quote requirements established continuous quoting requirements do not
Change To Amend Exchange Rule 517 in Rule 517(b). The Exchange also apply to long-term options series until
proposes to make a non-substantive the time to expiration is less than nine
August 11, 2016.
technical correction to section (9) months.14 Notwithstanding these
Pursuant to section 19(b)(1) of the
517(b)(1)(ii) to correct a typographical exceptions, any quote (including a quote
Securities Exchange Act of 1934
error in the Rule. in a long term option) must comply with
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
For trade allocation purposes, quotes Rule 517(b) to be considered a priority
notice is hereby given that on August 4,
will be considered either priority quotes quote. Accordingly, the Exchange
2016, Miami International Securities
and trade allocation will be in proposes to adopt Interpretations and
Exchange LLC (‘‘MIAX’’ or ‘‘Exchange’’)
accordance with Rule 514(e)(1),4 or non- Policies .01 to Rule 517 which will
filed with the Securities and Exchange
priority quotes and trade allocation will expressly state that a quote on a long-
Commission (‘‘Commission’’) a
be in accordance with Rule 514(e)(2),5 term option contract must satisfy the
proposed rule change as described in
based upon a Market Maker’s quote requirements outlined in Rule 517(b) to
Items I, II, and III below, which Items
width at certain times.6 be considered a priority quote on the
have been prepared by the Exchange.
MIAX Rule 517(b), Quote Priority, Exchange. The Exchange believes that
The Commission is publishing this
describes the requirements for quotes on adding proposed Interpretations and
notice to solicit comments on the
the Exchange to be considered priority Policies .01 will clarify the requirements
proposed rule change from interested
quotes for allocation purposes. for establishing priority quotes for long-
persons.
Specifically, MIAX Rule 517(b)(1)(i) term option contracts on the Exchange.
I. Self-Regulatory Organization’s establishes the standards which must be Further, the Exchange believes that
Statement of the Terms of Substance of met to establish a quote as a priority providing additional information on
the Proposed Rule Change quote at the time of execution. First, the how priority quotes are established for
The Exchange is filing a proposal to bid/ask differential of a Market Maker’s options with a time to expiration greater
amend Exchange Rule 517, Quote Types two-sided quote pair must be valid than nine (9) months will provide
Defined, to adopt new Interpretations width (no wider than the bid/ask
and Policies .01 and to make a non- differentials outlined in Rule $5 between the bid and offer (‘‘bid/ask
substantive technical correction to the 603(b)(4)).7 Second, the initial size of differentials’’) following the opening rotation in an
equity option contract. See Exchange Rule
Rule. The text of the proposed rule 3 The Exchange may list long-term option 603(b)(4).
change is available on the Exchange’s contracts that expire from twelve (12) to thirty-nine
8 The initial size of a Market Maker incoming
Web site at http:// (39) months from the time they are listed. See Standard Quote, Day eQuote and all other types of
www.miaxoptions.com/filter/wotitle/ Exchange Rule 406. eQuotes must be for the minimum number of
4 After all Priority Customer Orders (if any) at the contracts, which minimum number shall be at least
rule_filing, at MIAX’s principal office, one (1) contract. The minimum number of contracts
NBBO have been filled, executions at that price will
and at the Commission’s Public be first allocated to other remaining Market Maker will be determined by the Exchange on a class-by-
Reference Room. priority quotes, which have not received a class basis and announced to the Members through
participation entitlement, and have precedence over a Regulatory Circular. See Exchange Rule 604(b)(2).
II. Self-Regulatory Organization’s Professional Interest. See Exchange Rule 514(e)(1).
9 The priority quote width standard established
Statement of the Purpose of, and 5 If after all Market Maker priority quotes have by the Exchange can have bid/ask differentials as
Statutory Basis for, the Proposed Rule been filled in accordance with Rule 514(e)(1) and narrow as one MPV, as wide but never wider than
the bid/ask differentials outlined in Rule 603(b)(4),
Change there remains interest at the NBBO, executions will
or somewhere in between. See Exchange Rule
be allocated to all Professional Interest at that price.
mstockstill on DSK3G9T082PROD with NOTICES
In its filing with the Commission, the Professional Interest is defined in Rule 100 and 517(b)(1)(ii).
10 The term ‘‘System’’ means the automated
Exchange included statements includes among other interest, Market Maker non-
priority quotes (as described in Rule 517(b)(1)(iii)) trading system used by the Exchange for the trading
concerning the purpose of and basis for of securities. See Exchange Rule 100.
and Market Maker orders in both assigned and non-
the proposed rule change and discussed assigned classes. See Exchange Rule 514(e)(2). 11 See Exchange Rule 517(b)(1)(i)(D)(1).
6 See Exchange Rule 517(b)(1). 12 The term ‘‘MBBO’’ means the bid or offer on
20 17 CFR 200.30–3(a)(34). 7 A Market Maker is expected to price option the Exchange. See Exchange Rule 100.
1 15 U.S.C. 78s(b)(1). 13 See Exchange Rule 517(b)(1)(i)(D)(2).
contracts fairly by, among other things, bidding and
2 17 CFR 240.19b–4. offering so as to create differences of no more than 14 See Exchange Rule 406.
VerDate Sep<11>2014 16:39 Aug 16, 2016 Jkt 238001 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 E:\FR\FM\17AUN1.SGM 17AUN1](https://thefederalregister.org/doc/81_FR_55064/page/7.svg)
Document Created: 2018-02-09 11:34:55
Document Modified: 2018-02-09 11:34:55
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 54905 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR